I spend a good deal of my research time looking at high yield energy partnerships for the income side of my portfolio. I believe these entities should provide better long-term growth and income opportunities than traditional yield sector plays like utilities. I also think they will outperform the overall market in an environment of stagflation which I see in the pipeline. Recently EQT Midstream Partners (EQM) popped on my radar because of some recent recommendations on the stock by analysts and EQM looks intriguing from a good yield with reasonable growth prospect point of view.
Recent recommendations on EQM:
- It just made Barclays list of top eight MLPs this week.
- Credit Suisse also just upgraded the shares from "neutral" to "outperform" today. It has a price target of $39 a share on EQM.
- Wells Fargo also had the company on its list of favorite MLPs for 2013 in early December.
EQT Midstream Partners provides natural gas transmission, storage and gathering services in Pennsylvania and West Virginia. It owns, operates, acquires and develops midstream assets in the Appalachian Basin. The company operates an approximately 700 mile interstate pipeline system; and approximately 2,100 miles of low-pressure gathering lines.
4 reasons EQM is a good income play at just over $33 a share:
- It yields 4.3% and if it makes consensus earnings estimates this fiscal year, at least a 10% dividend hike should be in the offing.
- Sales are projected to rise more than 20% this year and analysts expect almost 10% growth in FY2014.
- It just announced it is selling its natural gas distribution business for cash and some midstream assets. It plans to use cash to acquire additional pipeline assets and production growth. Given expanding domestic energy production, this is a sound strategic move.
- Consensus earnings estimates for FY2013 and FY2014 have ticked up in the last week and EQM sells for a reasonable 16x forward earnings given its dividend yield and growth prospects.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.